Foster carers face unprecedented increase in costs

The Consumer Prices Index (CPI) rose by 5.5% in the 12 months to January 2022. This is the highest CPI 12-month inflation rate in the National Statistic series, which began in January 1997. It has continued to rise during 2022 with the Consumer Prices Index (CPI) rising by 9.9% in the 12 months to August 2022. Long term foster carers, who contribute so much in looking after children in care, are facing huge increases in costs with no prospect of an increase in income to offset this. Foster carers face higher bills for gas, petrol and food, as do social workers and other staff working in the children’s services sector. Similar pressures are faced by local authority directly delivered in-house fostering services and independent fostering agencies (IFA). Foster carers need proportionate annual uplifts in fee payments and allowances to make it viable for them to remain as foster carers.

The money local authorities have to spend from government grants, council tax and business rates has fallen by 16% since 2010. This means local authorities have an increasingly limited capacity to respond to these significant inflationary pressures.

Foster care placements are commissioned from IFAs by local authorities under a wide range of contractual arrangements, old and new. Most of these contractual arrangements include a process for negotiating annual uplifts of fees to IFAs, but few of these include a guaranteed uplift. As a result, many children are placed under ‘legacy’ agreements where an uplift has not been awarded for some years, some for as long as ten years. Whilst inflation was low, it might have been possible for some IFAs to compensate for legacy placement fee levels when tendering for new contracts. In other words, if an agency had a number of children in stable and long term placements where fees were frozen, then the agency could offset this by ensuring that fees for any new placements included an amount to compensate for the lack of any fee uplift on the legacy placements. This is not ideal, as the newer contracts are in effect paying for the older contracts. However, without any alternative, IFAs have had to be resourceful and address the lack of fee uplifts this way.

This has been possible to manage in previous years with inflation at sub 2%, but at the current and growing levels of inflation, it is not possible to address the increasing costs of long term carers in this way. If long term foster carers decide they are unable to afford to foster, they will have no alternative but to end their fostering careers. This could mean thousands of children, who would be best placed in foster care, living unnecessarily in residential care with a significantly higher cost to local authorities over time. It will also mean that for those children who have been assessed as being best placed in a family setting, they will not be provided with the opportunity to be placed in the most appropriate type of placement. Under section 22C of the Children Act, local authorities are required to ensure that children are placed in the type of care that they have been assessed as needing.

Foster carers have been treated as self-employed since 2003 when HMRC introduced a bespoke tax scheme for foster carers (‘foster care relief’). In April 2010, foster care relief was extended and renamed ‘qualifying care relief’. This was the last time this scheme was reviewed. Government should review and improve this relief as soon as possible - something that NAFP has been calling for over a number of years - but now is the time more than ever. Although not all carers pay tax, it would send a significant positive message from government that they recognise and acknowledge the financial difficulties foster care is facing. It would let foster carers know that government values them enough to try and help them.

The Independent Review of Children’s Social Care recognises the need to attract more foster carers to the sector. Its final report called upon government to immediately launch a new national foster carer recruitment programme, to approve 9,000 new foster carers over three years. The review did not sufficiently consider the escalating costs for foster carers and the potential impact of an unprecedented number of carers leaving the sector. This gap will not be easily filled through recruitment efforts as the concerns about affordability will be a deterrence to most prospective new carers. There is a need to urgently reduce the risks of existing carers leaving the sector.

Local authorities and IFAs negotiate around these issues on a regular basis, and NAFP plays a role in facilitating this discussion across all four nations and regions of England. However, the resources to address these current and unprecedented pressures can now only be provided by national government. NAFP believes the government should urgently make a pay award to foster carers, both within local authorities and IFAs to reserve and protect this precious resource for children and young people in need. This would be an important signal to existing and prospective foster carers that the government values their contribution.